Hope Bancorp : Third Quarter 2023 Earnings Conference Presentation

2023

Third Quarter

Earnings Conference Call

Monday, October 23, 2023

Forward Looking Statements & Additional Disclosures

This presentation may contain statements regarding future events or the future financial performance of Hope Bancorp, Inc. (the "Company") that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to, among other things, expectations regarding the business environment in which we operate, projections of future performance, perceived opportunities in the market, statements regarding our business strategies, objectives and vision, and statements about our strategic reorganization. Forward-looking statements include, but are not limited to, statements preceded by, followed by or that include the words "will," "believes," "expects," "anticipates," "intends," "plans," "estimates" or similar expressions. With respect to any such forward-looking statements, the Company claims the protection provided for in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties. The Company's actual results, performance or achievements may differ significantly from the results, performance or achievements expressed or implied in any forward-looking statements. The risks and uncertainties include, but are not limited to: possible further deterioration in economic conditions in our areas of operation; interest rate risk associated with volatile interest rates and related asset-liability matching risk; liquidity risks; risk of significant non-earning assets, and net credit losses that could occur, particularly in times of weak economic conditions or times of rising interest rates; the failure of or changes to assumptions and estimates underlying the Company's allowances for credit losses, regulatory risks associated with current and future regulations; and the COVID-19 pandemic and its impact on our financial position, results of operations, liquidity, and capitalization. For additional information concerning these and other risk factors, see the Company's most recent Annual Report on Form 10-K. The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.

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Q3 2023 Financial Overview

Total Capital & TCE Ratio

at 9/30/23

13.23%/7.96%

Total Deposits at 9/30/23

$15.7B

Gross Loans at 9/30/23

$14.3B

NPA/Total Assets at 9/30/23

0.31%

3Q23 Net Income & EPS

$30.0MM /$0.25

Strong Capital & Liquidity

• Company's total capital ratio was 13.23% at 9/30/23. All regulatory ratios expanded QoQ
• Tangible common equity ("TCE") ratio1 was 7.96% at 9/30/23
• Avail. borrowing capacity, cash & equivalents, & unpledged investment securities: $8.3B, or 53% of deposits, at 9/30/23

Deposits

• Deposits of $15.7B at 9/30/23, +1% QoQ, driven by +3% QoQ growth in customer deposits, partially offset by planned reduction of brokered time deposits
• Gross loan-to-deposit ratio: 91% at 9/30/23, vs. 95% at 6/30/23

Loans

• Loans receivable of $14.3B at 9/30/23, -4% QoQ, reflected prudent approach to loan growth, intentional decrease in mortgage warehouse lending, and payoffs and paydowns in a high interest rate environment

Asset Quality

• Nonperforming assets ("NPA") of $62MM at 9/30/23, -20% QoQ
• NPAs represented 31bps of total assets at 9/30/23, an improvement from 38bps at 6/30/23
• 3Q23 net charge offs: $31MM, included idiosyncratic charge off of $23.4MM

Earnings

• 3Q23 net income: $30MM, or $0.25 per diluted share
• 3Q23 net interest income: $135MM, +4% QoQ, driven by net interest margin expansion of +13 bps QoQ

1 TCE ratio is a non-GAAP financial measure. A quantitative reconciliation of the most directly comparable GAAP to non-GAAP financial measure is provided in the	3
Appendix of this presentation.

Strong Capital Ratios

Common Equity Tier 1 Capital Ratio

Well

Capitalized

6.50%

Total Capital Ratio

Well

Capitalized

10.00%

Tangible Common Equity Ratio1

Leverage Ratio

Well

Capitalized

5.00%

• All regulatory capital ratios increased QoQ. All regulatory capital ratios meaningfully above requirements for "well-capitalized"financial institutions
• Proforma capital very strong: Adjustments for the allowance for credit losses ("ACL") and hypothetical adjustments for investment security marks not otherwise already reflected in equity, still result in very strong capital ratios
• Dividend: Quarterly common stock dividend of $0.14 per share, equivalent to $0.56 per share annualized. Equivalent to a dividend yield of 6.33% at 9/30/23
• No stock buybacks during 3Q23
• Equity: Book value per common share of $16.92 & TCE per share1 of $13.01 at 9/30/23. Equity declined -2% QoQ, largely due to a negative change in accumulated other comprehensive income ("AOCI")

1 TCE ratio and TCE per share are non-GAAP financial measures. Quantitative reconciliations of the most directly comparable GAAP to non-GAAP financial measures are provided in the Appendix of this presentation.

• Proforma ratios at 9/30/23 are non-GAAP financial measures and reflect (a) inclusion of on- and off-balance sheet ACL not already in capital; (b) treatment of held-to-maturity ("HTM") securities as if they were available- for-sale ("AFS"), with unrealized losses in AOCI; and (c) removal of the AOCI opt-out in calculating regulatory capital.

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Strong Balance Sheet & Ample Liquidity Position

• Cash and cash equivalents increased to $2.5B at 9/30/23, up from $2.3B at 6/30/23
• Available borrowing capacity, cash and cash equivalents, and unpledged investment securities of $8.3B at 9/30/23, equivalent to 53% of total deposits, up from $7.7B and 50%, respectively, at 6/30/23
• Investment securities of $2.3B on balance sheet at 9/30/23, represented 11% of total assets. Effective duration of 4.7 at 9/30/23. Predominantly debt securities AFS. Primarily fixed-rate portfolio
• Bank Term Funding Program: $1.7B outstanding at 9/30/23, with a weighted average rate of 4.47%. Positive carry and contribution to net interest income

	Cash and Cash
	Equivalents
	$2.5 Bn
Fed Fund Lines
at Other Banks	$8.3B
$0.3 Bn
FRB Capacity	Available Borrowing
Capacity, Cash & Cash
$0.8 Bn	Equivalents, and
	Unpledged Investment
	Securities
	(at 9/30/23)
	FHLB Capacity
	$4.4 Bn

Unpledged

Securities

$0.3 Bn

Investment Securities Portfolio

At September 30, 2023	Amortized	Fair Value	Net Unrealized
($ in millions)	Cost	Loss
AFS (on balance sheet @ fair value)	$ 2,379	$ 1,994	$ (385)
HTM (on balance sheet @ amortized cost)	$ 267	$ 240	$ (27)
Total Investment Securities Portfolio	$ 2,646	$ 2,234	$ (412)

5

Diverse & Granular Deposit Base

Deposit Composition by Product Type

	Noninterest Bearing
Time Deposits	Demand Deposits
27%
42%

$15.7B

Total Deposits

(at 9/30/23)

Savings Deposits	Money Market and
3%	Interest Bearing
	Demand
	28%

• Total deposits of $15.7B at 9/30/23, +1% QoQ
• QoQ deposit growth reflects +3% QoQ growth in customer deposits, partially offset by a $368MM planned reduction of brokered time deposits

Deposit Composition by Customer Type

Consumer

35%

$15.7B

Total Deposits

(at 9/30/23)

Commercial

• • Wholesale 65%
• Average commercial deposit account size: approx. $300,000
• Average consumer deposit account size: approx. $50,000
• Uninsured deposit ratio was 37% of the Bank's total deposits at 9/30/23

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Well-Balanced Loan Portfolio

$0.9B

Avg Size: $0.6MM

$4.4B

Avg Size: $1.6MM

C&I

31%

$3.0B

Avg Size: $1.5MM

	$1.2B
Residential	Avg Size: $2.3MM
Mortgage	Multifamily
& Other
Residential

6% 9%

$14.3B

Loans Receivable	Nonowner-
Occupied CRE
(at 9/30/23)	33%

Owner-Occupied CRE	$4.8B
Avg Size: $2.3MM
21%

• Loan portfolio well-diversified across major loan types of nonowner-occupied CRE, C&I, owner-occupied CRE, multifamily residential ("MFR"), and residential mortgage
• Total loans receivable: $14.3B at 9/30/23, -4% QoQ, reflected prudent approach to loan growth, intentional decrease of mortgage warehouse lending, and impact of payoffs & paydowns in a high interest rate environment
• Aggregate payoffs and paydowns of $576MM in 3Q23, exceeded new production volume of $329MM in 3Q23

7

Diversified CRE Portfolio with Low LTVs

Total CRE: Distribution by LTV (ex. SBA)

As a % of

Total Loans:

12%

9%

9%

7%

6%

6%

5%

3%

7%

$9.0B
CRE Portfolio	Avg Loan Size:
(at 9/30/23)
Weighted Avg LTV1:
Multi-tenant Retail	$2.3MM
$1,745MM	42.7%
Industrial & Warehouse	$2.2MM
$1,255MM	40.0%
Multifamily	$2.3MM
$1,235MM	54.7%
Gas Station & Car Wash	$1.7MM
$1,038MM	47.4%
Hotel/Motel	$2.0MM
$827MM	45.8%
Mixed Use	$1.8MM
$813MM	43.2%
Single-tenant Retail	$1.3MM
$672MM	46.1%
Office	$2.4MM
$455MM	50.0%
All Other	$1.5MM
$933MM	37.9%

	> 55% -
	60%:	> 60% - 65%:	> 65% - 70%:
	10%	7%	5%
> 50% - 55%:
14%	$9.0B	> 70%:
	6%

CRE Portfolio

(at 9/30/23)

45.0%

Weighted Avg

LTV1

< 50%:

58%

1 Weighted average loan-to-value("LTV"): current loan balance divided by updated collateral value. Collateral value updates most recent available appraisal by using CoStar market and property-specific data, including submarket appreciation or depreciation, and changes to vacancy, debt service coverage or rent/sq foot. LTVs disclosed prior to 2Q23 were based on starting point values.

Calculations exclude Small Business Administration ("SBA") loans.

• Total CRE loans of $9.0B at 9/30/23, -2% QoQ. Portfolio consists of $4.8B of nonowner-occupied CRE, $1.2B of MFR, and $3.0B of owner-occupied CRE
• CRE Office: represented only 3% of total loans at 9/30/23, with no central business district exposure

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Granular CRE Portfolio, Diversified by Submarket

CRE Portfolio by Size Segment	CRE Portfolio by Geographic Submarket
	($ Millions)

Loan Size	Balance	# of	Average	Weighted
Loan Size
(at 9/30/23)	($ Millions)	Loans	Average LTV 1
($ Millions)
> $30MM	$ 292	7	$ 41.7	59.7%
$20MM - $30MM	$ 640	26	$ 24.6	45.0%
$10MM - $20MM	$ 1,263	92	$ 13.7	48.6%
$5MM - $10MM	$ 1,734	256	$ 6.8	47.2%
$2MM - $5MM	$ 2,582	835	$ 3.1	44.7%
< $2MM	$ 2,462	3,408	$ 0.7	39.7%
Total CRE Portfolio	$ 8,973	4,624	$ 1.9	45.0%

1 Weighted average LTV: current loan balance divided by updated collateral value. Collateral value updates most recent available appraisal by using CoStar market and property-specific data, including submarket appreciation or depreciation, and changes to vacancy, debt service coverage or rent/sq foot. LTVs disclosed prior to 2Q23 were based on starting point values. Calculations exclude SBA.

• LTV ratios are consistently low across segments by size and by property type
• Vast majority of CRE loans have full recourse and personal guarantees
• 99% of total CRE portfolio was pass-graded at 9/30/23

Other States

Illinois

Washington

Texas

New Jersey

Other New

York $331

Kings County

Queens County

Manhattan

Other NorCal

Greater SF Bay Area

San Francisco, $40

LA Fashion District

Gateway Cities

San Gabriel Valley

South Bay

LA Koreatown

$9.0B

CRE Portfolio	Other LA County
(at 9/30/23)	(No exposure to
	downtown
	commercial
	business district)

Orange County

San Bernardino County

Riverside County

Other SoCal

SoCal

NorCal

NY/NJ

Texas

Washington

Illinois

Other States

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Net Interest Income & Net Interest Margin

Net Interest Income & Net Interest Margin

QoQ Change in Net Interest Margin ("NIM")

QoQ change

$153

($ Millions)

$151

+22bps +9bps

2.70%

Reduction

+4bps	+2bps	-10bps
Other	Increase in	Reduction

-14bps2.83%

			-2%	$134					$135
					$131
						-11%			-2%				+4%
3.49%
	3.36%
				3.02%
								2.83%
										2.70%

Loan yield in avg expansion borrowings

& debt

earning	avg int-earn	in avg
assets yield	cash &	loans
expansion	equivalents

Higher cost of interest bearing deposits

3Q22		4Q22	1Q23		2Q23	3Q23
		Net Interest Income					Net Interest Margin (annualized)

2Q23		3Q23 NIM change: +13 bps QoQ	3Q23
		Increase		Decrease		Total

• 3Q23 net interest income of $135MM, +4% QoQ
• 3Q23 average earning assets of $19.0B, -2% QoQ, primarily driven by reduction in loans
• 3Q23 average borrowings and debt of $1.9B, -20% QoQ. QoQ deposit growth and reduction in loans reduced need for borrowings in 3Q23

• 3Q23 NIM of 2.83%, +13bps QoQ
• Positive impact from expanding earning asset yields (+26 bps), reduction in average borrowings & debt (+9 bps) and growth in average interest earning cash & equivalents (+2 bps), partially offset by -10 bps from a reduction in average loan balances and -14 bps from a higher cost of interest bearing deposits

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